Churchill Downs Inc. 10-Q Summary: Q1 2026
Business Context and Reporting Period
This report covers the quarterly period ended March 31, 2026. Churchill Downs Inc. (CDI) operates through three primary segments: Live and Historical Racing, Wagering Services and Solutions, and Gaming. The company continues to develop its portfolio, including the recent acquisition of Casino Salem in New Hampshire (completed August 2025) and the ongoing operation of the Kentucky Derby.
Key Financial Metrics
| Metric (in millions) | Q1 2026 | Q1 2025 |
|---|---|---|
| Total Net Revenue | $663 | $643 |
| Operating Income | $143 | $135 |
| Net Income | $83 | $77 |
| Diluted EPS | $1.16 | $1.02 |
| Adjusted EBITDA | $257 | $245 |
| Operating Cash Flow | $295 | $247 |
| Total Debt (Gross) | $4,951 | $5,155 |
| Cash & Restricted Cash | $291 | $271 |
Material Changes vs. Prior Period
- Revenue Growth: Total net revenue increased by $20 million (3.1%) year-over-year. This was driven by a $24 million increase in the Live and Historical Racing segment, primarily due to growth in Historical Racing Machines (HRMs) in Kentucky and Virginia. This was partially offset by a $6 million decline in the Gaming segment.
- Segment Performance:
- Live and Historical Racing: Revenue rose to $297 million. Growth was led by Kentucky HRM venues (+$17M) and Virginia HRM venues (+$5M).
- Gaming: Revenue decreased to $257 million. The decline was primarily due to the cessation of HRM operations in Louisiana in May 2025 following a state court ruling, which negatively impacted comparability.
- Wagering Services: Revenue increased slightly to $109 million, driven by retail sports betting growth.
- Profitability: Operating income increased by $8 million to $143 million. Operating margins improved from 21% to 22%.
- Debt Reduction: Total debt decreased by $204 million to $4.95 billion, primarily due to paydowns on the revolving credit facility ($188 million reduction).
Outlook, Risks, and Unusual Items
- Capital Expenditures: The company expects project capital expenditures to be approximately $180 million to $220 million for the full year 2026. Key projects include developments at Churchill Downs Racetrack and the redevelopment of Casino Salem into Rockingham Grand Casino.
- Subsequent Event: On April 21, 2026, CDI announced an agreement to acquire the intellectual property rights for the Preakness Stakes and Black-Eyed Susan Stakes for $85 million.
- Regulatory Risks: The filing highlights the impact of the Louisiana Supreme Court ruling on historical racing, which forced the discontinuation of HRM operations in that state. The company notes ongoing risks related to regulatory changes, competition, and economic conditions affecting discretionary spending.
- Liquidity: The company maintains $722 million in available borrowing capacity under its revolving credit facility. Management anticipates cash flows from operations and available borrowings will be adequate to fund operations and capital expenditures for the next 12 months.
Investor Verification Checklist
- Debt Maturities: Verify the funding strategy for the $600 million 2027 Senior Notes maturing in April 2027, as the company is currently exploring options including cash on hand and debt markets.
- Regulatory Exposure: Monitor the status of HRM operations in other jurisdictions, given the precedent set by the Louisiana ruling.
- Acquisition Integration: Track the progress and capital requirements for the Casino Salem (Rockingham Grand Casino) redevelopment and the Preakness IP acquisition.
- Interest Rate Sensitivity: Note that a 1% increase in SOFR would reduce net income by approximately $14 million due to variable rate debt exposure.